Recently, the Comptroller for the US John Dugan told a meeting of the American Bankers Association that there were problems lurking with Reverse Mortgages — and even went as far as comparing reverse mortgages to subprime mortgages.

“While reverse mortgages can provide real benefits, they also have some of the same characteristics as the riskiest types of subprime mortgages – and that should set off alarm bells,” Dugan said. ” I believe that now is the time to get out in front of this issue – before real problems develop – so that reverse mortgage providers make these loans in a way that is prudent for both lenders and borrowers.”

Reverse mortgages have grown in popularity recently and will most likely continue to grow in popularity simply due to the sheer number of people who are reaching retirement age. The baby boomer generation was not known for their saving – and it is probable that they are going to depend on their home equity as a source of retirement income.

Dugan went on to describe some of the potential problems with reverse mortgages:

Mr. Dugan said the ability of consumers to access their home equity through immediate and large lump sum payments can pose substantial risks. For example, lenders may simultaneously and aggressively market investment, insurance, or annuity products or, worse, attempt to condition loan approval on the purchase of such products. Likewise, with access to large lump sums upon closing, elderly borrowers can be particularly vulnerable to coercive sales of annuity and long term care insurance products that are expensive and may not be appropriate to their needs.

“Another risk is that reverse mortgage borrowers, because they have no immediate repayment obligations, may overlook substantial fees that are attached to the loan,” Mr. Dugan said. “And consumers who spend their loan proceeds quickly or unwisely may end up short of the funds they need for home maintenance or property taxes, with disastrous consequences: the failure to make those payments can result in foreclosure.”

While there may be some regulation loopholes that need to be closed, almost all reverse mortgages are insured by FHA and are originated through the FHA mortgagee program — meaning that FHA has the authority to change the regulatory problems as needed.

So if someone is worried about FHA insured reverse mortgages becoming “the new subprime”, then this is something that can be avoided by FHA stepping in and making the needed changes.

Worried about missing out on a fat chunk of change? Find out if you qualify for a loan today by filling out our short form! Click HERE.

One of the most popular topics with new home buyers is the new 8000 tax credit for new home buyers. There is no doubt that for first time home buyers, this tax credit has been a strong incentive to purchase a home – and the entry level home market has seen improvement as a result.

Now there is talk about extending the 8000 tax credit until 2010 and raising it to $15,000 as well.

According to Bernard Baumohl, an economist at the Economic Outlook Group:

“I’m fairly confident that (Congress) will extend the tax credit, because it is so important that housing come back, but raising the tax credit will be difficult because it reduces taxes even more.”

Current Proposals:

• A Senate bill to expand the tax credit to $15,000 for any home buyer regardless of income was introduced this month by Sen. Johnny Isakson, R-Ga. It is co-sponsored by Senate Banking Committee Chairman Chris Dodd, D-Conn.

• A House bill to keep the $8,000 credit in place until June 2010 and expand it to all home buyers was introduced last month by Rep. Kenny Marchant, R-Texas. It also would provide a $3,000 credit to homeowners who refinance.

• Another bill in the House, introduced by Rep. Eddie Bernice Johnson, D-Texas, would extend the credit to all home buyers through 2010.

Generally speaking, it seems to be a very popular idea to extend the tax credit deadline and a somewhat popular idea to increase the tax credit from 8000 to 15,000 — but, as we learned when the initial tax credit was passed into law, it ain’t over until it is over — so anything can happen.

There isn’t much time left for free government cash! Find out if you qualify for a loan today by filling out our short form! Click HERE.

Troublesome Numbers: 7,000 Again.  700,000 for the First Time.

The housing meltdown was a major reason in the plummet of the Dow to levels below 7,000. Increased confidence in the financial system resulted in a 2 month rally.

However, sentiment is changing as people are starting to see another potential meltdown on the horizon.

This next meltdown is likely drop the Dow back to levels below 7,000. In addition, it is possible the country could see non-business bankruptcy filings hit 700,000 in the fourth quarter of this year, which would more than double the number of filings of Q4 2008. In fact, it would set a new record for bankruptcy filings.

The practice of companies willing to extend credit to many consumers, who may not have been in a position to take on that credit, combined with consumers’ willingness to take advantage of that available credit was the main factor in the first collapse.

The next one will have a similar story line.

This time, it is the credit card companies that have over-extended credit to many consumers. And, once again, many consumers have taken advantage of that available credit.

Like the housing crisis, this is not sustainable and will result in huge losses for companies as well as major financial issues for hundreds of thousands of consumers that will result in increased bankruptcies.

This would play out on its own but Congress may speed up the process and make it more severe yesterday by passing a new law regulating the credit card companies.

Additional regulations on credit card companies will do two things:
1)    Hurt Credit Card company profits by increasing their risk.
2)    Decrease available credit for consumers .

Both issues are not good for the equity markets as it hurts consumer spending capabilities and affects company profits. This is why we may, once again, see the market fall past 7,000 and see, for the first time, record bankruptcies possibly reaching 700,000 in Q4.